Investors Don’t Care About the Big Shutdown
Investors delivered a strong message of indifference to the Clown College on Capitol Hill by sending stocks higher.
The government shutdown failed to upset investors on Tuesday, as they bought stocks with a vengeance, sending the Nasdaq 100 Index to its highest level since the end of the dotcom era. Not to be outdone, the Russell 2000 Index reached another record-high close and hit another record intraday high. Stock market volatility sank and the Chicago Board Options Exchange Volatility Index (VIX), fell more than 6 percent.
The Dow Jones Industrial Average (NYSEARCA:DIA) picked up 62 points to finish Tuesday’s trading session at 15,191 for a 0.41 percent advance. The S&P 500 (NYSEARCA:SPY) surged 0.80 percent to close at 1,695. The Nasdaq 100 (NASDAQ:QQQ) jumped 1.08 percent to finish at 3,253 after rising as high as 3,254.33 – its highest intraday level since November 3, 2000. The Russell 2000 (NYSEARCA:IWM) skyrocketed 1.27 percent to reach a record-high close at 1,087.43, after hitting yet another all-time record intraday high of 1,087.78.
In other major markets, oil (NYSEARCA:USO) fell 0.46 percent to close at $36.68. On London’s ICE Futures Europe Exchange,Brent crude oil declined 52 cents (0.48 percent) to $106.91/bbl. (NYSEARCA:BNO). December gold declined $38.00 (2.86 percent) to $1,289.00 per ounce (NYSEARCA:GLD). Transports outran the super-secret, TR-3B on Tuesday, with the Dow Jones Transportation Average (NYSEARCA:IYT) surging 1.38 percent.
Tuesday’s trading session brought another round of big gains for the following maritime subsector stocks: DryShips (NASDAQ:DRYS) up 5.37 percent; Eagle Bulk Shipping (NASDAQ:EGLE) up 6.27 percent, and Baltic Trading (NASDAQ:BALT) up 5.11 percent.
In Japan, stocks made a modest advance despite the fact that the Bank of Japan’s third quarter Tankan Large Manufacturers Index of Business Conditions jumped to 12 from the second quarter’s reading of 4, beating expectations for a less-significant increase to 7. On the other hand, Japan’s unemployment rate rose to 4.1 percent in August from July’s 3.8 percent.
The yen weakened to 98.20 per dollar during Tuesday’s trading session in Tokyo. A weaker yen causes Japanese exports to be more competitively priced in foreign markets (NYSEARCA:FXY). The Nikkei 225 Stock Average rose 0.20 percent to 14,484 (NYSEARCA:EWJ). In China, the Shanghai Stock Exchange will be closed through the week for National Day (NYSEARCA:FXI). The Hong Kong Stock Exchange was also closed for the holiday (NYSEARCA:EWH).
China’s National Bureau of Statistics reported that the official manufacturing Purchasing Manufacturers Index for September rose to 51.1 from August’s 51.0. The reading fell short of economists’ expectations for an increase to 51.6. The result was largely consistent with the HSBC Manufacturing PMI, which ticked up to 50.2 in September from August’s 50.1. The result indicated a decline from the flash reading of 51.2.
In Europe, stocks soared despite Eurostat’s report that the unemployment rate for the Eurozone remained unchanged at 12.0 percent in August. For the greater, 28-nation European Union, the August unemployment rate also remained unchanged at 10.9 percent. Markit Economics reported that the final Markit Eurozone Manufacturing PMI for September remained unchanged at 51.1, consistent with economists’ expectations (NYSEARCA:VGK).
The Euro STOXX 50 Index finished Tuesday’s session with a 1.38 percent jump to 2,933 – climbing further above its 50-day moving average of 2,825. Its Relative Strength Index is 63.67 (NYSEARCA:FEZ). Technical indicators revealed that the S&P 500 climbed further above its 50-day moving average of 1,679 after finishing Tuesday’s session with a 0.80 percent surge to 1,695. Its Relative Strength Index jumped from 48.32 to 54.22. Although the MACD remains above the zero line, it has crossed below the signal line, suggesting the likelihood of a retreat.
For Tuesday, all sectors were solidly in positive territory. The healthcare sector led the group with a gain of 1.27 percent as Obamacare began.
Consumer Discretionary (NYSEARCA:XLY): +0.81 percent
Technology: (NYSEARCA:XLK): +0.87 percent
Industrials (NYSEARCA:XLI): +0.64 percent
Materials: (NYSEARCA:XLB): +0.43 percent
Energy (NYSEARCA:XLE): +0.64 percent
Financials: (NYSEARCA:XLF): +0.70 percent
Utilities (NYSEARCA:XLU): +0.30 percent
Health Care: (NYSEARCA:XLV): +1.27 percent
Consumer Staples (NYSEARCA:XLP): +0.60 percent
Bottom line: Investors ignored the government shutdown and upcoming debt ceiling debate as the Russell 2000 broke another record high and the Nasdaq 100 hit its highest intraday level since November 3, 2000. Investors continue to discount the government shutdown and debt ceiling deadline as we head into the historically weak month of October.
John Nyaradi is the author of The ETF Investing Premium Newsletter.